The government says it will seek an “injection of private capital” in the Royal Mail but stopped short of detailing how much of the postal service will be sold.
The only division that is guaranteed to remain in public hands is the Post Office, which will be allowed to expand its portfolio of financial services products, which means Royal Mail’s direct mail business, media services and prized delivery services could well be up for grabs.
The question of whether Royal Mail, and its competitors, would benefit from being left to the vagaries of the private sector is one that has popped up periodically for the past 30 years.
It received renewed attention last year following the last Government’s discussion and then rejection of a partial sale. It was also mooted by some after postal workers downed tools in protest over modernisation plans in the autumn.
The Communication Workers Union (CWU) had been increasingly irked by moves to streamline and boost efficiency through job cuts, pay freezes and changes to working practices. Less controversially, the Royal Mail has sought to inject some life into its DM and media services through mail innovation and services including the recently launched insight tool and last year’s introduction of marketers’ resource Mail Media Centre.
It was said by industry observers that the changes were in preparation for a sell-off.
From a naked business perspective, the changes, although painful for many, have left the Royal Mail in a much healthier state, transferring a firm that was losing £1m a day to one that registers the same amount on a daily basis.
The turnaround was confirmed last week when Royal Mail posted a 26% surge in operating profit.
Privatisation could see the end of the mail delivery advantage, otherwise known as the “final mile” and the VAT perk the Royal Mail currently enjoys, and therefore level the playing field for eager competitors such as UK Mail and TNT Post.
It could also accelerate the Royal Mail’s efficiency and modernisation drive and potentially lead to a more focused service for direct mail clients, business customers and the public.
However, a potential spanner, for the Royal Mail at least, exists in the CWU. The Union dismissed the latest sell-off plan, warning that the move to “regurgitate failed policies will be deeply unpopular” with the public.
It could also prove to be unpopular with a still smarting CWU and could heighten the possibility of future strike action, which damaged the Royal Mail brand last year.
This aside, a truly competitive mail sector can only bring with it greater choice to direct marketers. Several obstacles will have to be negotiated, of course, and postal workers and their representatives must be handled sensitively, but a Royal Mail in private hands could prove to be a boost for it and its competitors.